Nigeria’s leading manufacturers are facing significant financial strain due to drastic macroeconomic changes implemented by the Federal Government (FG). Recent 2024 financial reports reveal a staggering 90.6% surge in production costs, driven by inflationary pressures, foreign exchange volatility, and rising raw material expenses.
Rising Production Costs
The combined cost of sales for 12 major consumer goods firms skyrocketed by 88.5% to ₦3.91 trillion in 2024, up from ₦2.1 trillion in 2023. Key players like Nestlé Nigeria (97.7% increase), BUA Foods (110% increase), and Nigerian Breweries (97.5% increase) were among the hardest hit.
Despite efforts to boost backward integration (local sourcing of materials), manufacturers still saw an 88% year-on-year rise in raw material importation costs, highlighting the persistent impact of exchange rate instability.
Financial Strain and Cost-Cutting Measures
The sector’s finance costs surged by 81% to ₦1.2 trillion, exacerbated by the Central Bank of Nigeria’s (CBN) high-interest rate regime. However, manufacturers reduced reliance on bank loans, cutting borrowings by 6.4% to ₦1.7 trillion in 2024.
To stay afloat, firms adopted aggressive cost-cutting strategies, including layoffs and price hikes. Despite a 67.7% increase in turnover (₦7.6 trillion), pre-tax losses widened by 76.6% to ₦407.4 billion, underscoring the sector’s precarious position.
A Glimmer of Hope for 2025?
Analysts suggest that stabilizing macroeconomic indicators could improve conditions in 2025. However, for now, manufacturers remain under severe pressure, balancing survival tactics with hopes for policy relief.
List of Firms Analyzed:
Nestlé Nigeria, Cadbury Nigeria, Unilever Nigeria, Nigerian Breweries Plc, BUA Foods, Guinness Nigeria, Northern Nigeria Flour Mills, Dangote Sugar, Honeywell Flour Mills, Flour Mills Nigeria, UAC Nigeria, and Golden Guinea.
Companies Comment on Performance
Despite economic challenges, company leaders remained optimistic about their 2024 performance.
Nestlé Nigeria
Managing Director Wassim Elhusseini highlighted the company’s resilience, stating:
“Our 2024 results demonstrate the strength of our brands and teams in a challenging business environment. The 75.2% revenue growth and a 35.6% improvement in operating profit to N167.9 billion reflect our solid performance.
"While high finance costs due to the naira’s devaluation impacted net profit and equity, I am pleased that our Q4 2024 results mark a return to profitability, with a net profit of N19.7 billion, compared to a loss of N36.4 billion in Q4 2023.”
Nigerian Breweries Plc
Managing Director/CEO Hans Essaadi attributed the company’s revenue growth to strategic initiatives:
“Our strong year-on-year revenue growth was driven by pricing strategies, market expansion, innovation, and operational efficiencies. Despite macroeconomic headwinds, group operating profit surged by 54%, reflecting effective cost management and process optimization.”
BUA Foods
Managing Director Engr. (Dr.) Ayodele Abioye emphasized the company’s agility and resilience:
“Despite significant macroeconomic challenges, we effectively managed supply chain costs and foreign exchange losses. Our expansion strategy has strengthened our ability to meet growing demand and improve operational efficiency.”
Unilever Nigeria
Managing Director Tobi Adeniyi highlighted the company’s commitment to consumer needs:
“Our sustained growth reflects our focus on delivering top brands for daily consumer needs. While we’re pleased with our progress in operational efficiency, cost optimization, and market share expansion, we remain committed to further business growth and socioeconomic impact.”
Analysts’ Perspective on the Operating Environment
Some analysts expressed concerns about the implications of Nigeria’s economic policies on manufacturers, citing challenges such as high costs of sales, currency devaluation, and inflation.
Economic Reforms and 2025 Outlook – CPPE
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, explained:
“High costs of sales were driven by exchange rates, finance costs, energy, and logistics. 2024 was a transitional year due to economic reforms, which severely impacted profits. However, pressures are easing, with signs of naira stabilization, lower energy prices, and slowing inflation. If no drastic changes occur, 2025 looks more positive.”
NACCIMA Identifies Challenges and Proposes Solutions
President of the Nigerian Chamber of Commerce, Industry, Mines, and Agriculture (NACCIMA), Dele Oye, attributed rising costs—some exceeding 100%—to multiple challenges. He proposed solutions including:
- Establishing a stable, long-term policy framework for manufacturers
- Involving independent stakeholders in policy-making
- Prioritizing infrastructure development (power supply, transport)
- Simplifying taxation to encourage investment
- Implementing fair regulatory guidelines for healthy competition
- Controlling inflation through monetary policies, including lowering interest rates
MAN Calls for Actionable Macroeconomic Reforms
Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, noted:
“Declining purchasing power has led to unsold goods, while production costs continue to rise. Macroeconomic reforms must prioritize concrete actions over rhetoric. The President’s goal of reducing inflation to 15% and stabilizing the naira at N1,500/$ should be backed by clear, measurable steps.”
Rising Costs of Raw Materials – Analysts’ Insights
Market experts, including David Adonri (High Cap Securities), Olatunde Amolegbe (CIS), and Tajudeen Olayinka (Investment Banker & Stockbroker), highlighted the surge in raw material costs due to:
- Domestic and external cost-push factors
- Insecurity and high energy costs
- Naira volatility and depreciation
- Inflationary pressures reducing consumer purchasing power
However, they noted that cost pressures may ease in 2025, with emerging signs of stabilization.
The Way Forward
To ensure sustainable growth, analysts recommended:
- Sourcing more raw materials locally
- Strengthening marketing strategies
- Implementing public policies to support business growth
- Reducing production and distribution costs
- Cutting energy expenses and lowering interest rates
With the right policies and economic adjustments, Nigeria’s manufacturing sector could see improved performance in 2025.